Business failures set to drop 24%

This year is expected to show a near 24% decline in the number of companies going out of business or needing court protection to survive.

New figures, published yesterday by corporate recovery and insolvency specialists, Kavanagh Fennell, showed that the level of business failure cases fell by 31% — on a year-on- year basis — in November, from 139 to 95,

The first 11 months of the year showed a 20% annualised decline to 1,236 cases.

Of further significance, the new data shows reductions in the traditional concern sectors of retail, hospitality and construction.

The latter sector saw a 17% annualised decline in business failures for the first 11 months of the year, to 317; with retail failure cases falling by 14% to 176.

In the hospitality sector, 143 failures were noted, representing an annualised fall of 4%.

In the year to date,receiverships are down by 12%, year-on-year; liquidations are down 22% and there has been a 27% drop in the number of firms entering examinership.

According to David Van Dessel — partner with Kavanagh Fennell — the total number of insolvencies for this year, as a whole, should amount to around 1,300; down from just over 1,700 measured last year.

However, he warned that business failure rates in Ireland still remain above acceptable levels.

“To put our current rate of corporate insolvencies into perspective, pre-recession figures were in the region of 400 corporate insolvencies per annum.

“So, although a 20% reduction is a positive sign, we still have some distance to go before we arrive at what could be described as a normal level of corporate insolvencies, which I would estimate to be somewhere above 400 company failures per annum, but well below our current level of 1,300,” he said.

While noting that this year’s reduction is a positive sign, Mr Van Dessel stressed that the business environment remains “very challenging”.

“The impending lead-up to Christmas will, hopefully, boost retail sales and help with healthier balance sheets in the retail and related sectors entering the new year,” he said.

Mr Van Dessel added that the pending law allowing SMEs to apply directly to the Circuit Court for protection, rather than the High Court will be welcome, less costly, and “should allow companies to navigate through a difficult financial period more easily and, thus, avoid the more terminal process of liquidation”.


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